Travelers Group Inc., in an attempt to take advantage of the deregulation of Japan's financial markets, will acquire a stake in Nikko Securities Co., Japan's third-largest brokerage said.
Nikko said it will hold a news conference this evening Tokyo time to discuss details of the transaction. Travelers will buy as much as 25% of Nikko, said a Nikko official who asked not to be named.
New York-based Travelers could pay up to 200 billion yen ($1.44 billion) for the stake, the Nihon Keizai business daily reported, without citing sources. Travelers, now merging with Citicorp to form the world's biggest financial company, would become Nikko's largest shareholder and the first major foreign investor in Japan's top three brokerages.
Investors sought Nikko shares, which rose 4.8% Friday. They were untraded today as bid orders overwhelmed sell orders. The most recent bid was 486 yen, up 50 yen from Friday's close.
Travelers and its rivals are trying to expand in Japan as the country's "Big Bang" deregulation offers them a chance to get a bigger share of Japanese investors' $8.75 trillion in financial assets. Japanese securities firms and banks, meanwhile, are suffering from the nation's seven-year slump. Nikko lost money in three of the past four fiscal years.
"What is encouraging about this Nikko deal is that it looks as though we've got a foreign institution actually going into buy 25% of the company at somewhere close to the market price, which implies that they think there is some value in there," said Jason James, head of economic research at HSBC Securities (Japan) Ltd.
Last month's $71-billion agreement to merge with Citicorp will turn Travelers intoa company with more than 100 million customers in 100 countries that offers more financial services than almost any rival. The companies, which have yet to merge, are counting on regulatory changes that would permit one company to own a bank, a brokerage and an insurance company.